Recap: Oil prices posted their first weekly gain in four weeks as proposed trade talks set for next week between the U.S. and Coil futures WTI rose to their highest level since mid-December, with WTI briefly recapturing the $48.00 level, while Brent touched above $58.00. It appears traders are willing to put risk on at this moment, looking for the aforementioned news and OPEC lead production cuts to prop up prices. Next week’s meeting between China and the U.S. will determine further upside potential. February WTI trimmed gains coming into the settlement period, to settle at $47.96 a barrel, up 87 cents, or 1.85%. March Brent settled at $57.05 a barrel, up $1.11, or 1.98%. February RBOB pared some of its earlier gains to settle up 1.3 cents, or 0.9%, at $1.3736 a gallon, while February heating oil added 2.7 cents, or 1.5% to $1.7692 a gallon
Technical Analysis: February WTI continued to pull away from the bottom of the rounded formation we wrote about yesterday, working its way toward $54.76, the breakout point for this formation. We would look for continued advances toward this level but would not jump the gun until the breakout occurs. Resistance prior to this level is set at $50.00 and $52.15. Support is set at $44.35 and below that at $42.50.
Fundamental News: The EIA reported that US Gulf coast gasoline inventories increased to 89.2 million barrels in the week ending January 4th, the highest on record. US distillates stocks increased by 9.52 million barrels last week to 129.4 million barrels, the largest weekly increase since December 2016. US refinery utilization increased by 2.1% to 97.2% last week, the highest level on record for this time of year.
US energy companies cut the number of rigs searching for oil for the first time in three weeks as producers start to reduce their 2019 drilling plans. Baker Hughes reported that drillers cut eight oil rigs in the week ending January 4th, bringing the total count to 877.
Iraq’s Oil Minister, Thamer Ghadhban said the country was committed to the OPEC and non-OPEC output cut agreement and would keep its oil production at 4.513 million bpd for the first half of 2019. OPEC and non-OPEC producers agreed in December to reduce its supply by 1.2 million bpd in 2019.
IIR Energy reported that US oil refiners are estimated to have shut in 167,000 bpd of capacity offline in the week ending January 4th, cutting available refining capacity by 53,000 bpd from the previous week. IIR expects offline capacity to increase to 265,000 bpd in the week ending January 11th.
The Iranian navy will send warships to deploy in the Atlantic starting in March, as the country seeks to increase the operating range of its naval forces to the backyard of the US. Iran sees the presence of US aircraft carriers in the Gulf as a security concern and its navy has sought to counter that by showing the flag near US waters. Iran’s naval deputy commander said a flotilla will leave for the Atlantic early in the Iranian new year, starting from March.
According to shipping data compiled by Bloomberg and market intelligence company, Kpler, supertankers Almi Atlas and Manifa loaded about 2 million barrels each of US oil in December and are sailing towards China.
Early Market Call – as of 9:05 AM EDT
WTI – Feb $48.91, up 95 cents
RBOB – Feb $1.3781, up 3.02 cents
HO – Feb $1.8036, up 3.48 cents
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